Is It Legal to Slap RINS on Exported Ethanol?

5/10/18 Legal Challenges with Ethanol, RFS
( A South Dakota ethanol plant has been in operation for a decade. )

Some agricultural groups are continuing to lobby their pro-ethanol positions after a tentative deal on U.S. biofuel policy was struck at a meeting at the White House earlier this week. President Trump met with key senators from across both sides of the Renewable Fuel Standard (RFS) debate.

The president announced a decision to allow E-15 to be sold year-round instead of being offered select months out of the year in certain regions. There was also a decision to not cap renewable identification numbers (RINs) on ethanol, a move some big oil senators wanted.

Sen. Chuck Grassley (R-IA) attended the meeting on Tuesday and said overall, he considered the talks “good news for ethanol.”

EPA Administrator Scott Pruitt testified in front of the Energy and Commerce Committee on April 18 where he stated the E-15 year-round decision could potentially be a legal issue.

“There’s also consideration about the RVP [Reid Vapor Pressure] waiver and E-15 being allowed year-round,” said Pruitt as he testified for the Energy and Commerce Committee hearing on April 26, 2018.

“I think that’s something that’s a legal determination, not a policy determination.” Grassley says President Trump has ordered Pruitt to implement E-15 year-round at the White House meeting this week, an action Grassley said Pruitt committed to doing.

“Pruitt said without hesitation that we can do it, meaning the EPA can put out the regulation,” said Grassley.

Most ag groups, senators from ag states and companies saying majority of the news, including E-15 year-round and no caps on RINs is a positive. However, the topic of slapping RINS on exported ethanol is also under consideration in addition to E-15 year-round and no caps on RINs.

“I want to make sure anything else that’s done as a result of the meeting [Tuesday] beyond the year-round E-15 and the no cap on RINS [will not detract or any additional measure] doesn’t detract from the victory we had with having year-round E-15,” said Grassley.

Some in the ethanol industry question the legality of whether RINs on exported ethanol can actually happen.

Critics of RINs on exported ethanol say two threats may happen. Exporting RINs on ethanol could be considered an illegal subsidy with the World Trade Organization (WTO) rules.

Critics also say the RFS rule is strictly drafted to promote domestic production. Potential RINs on exported biofuels does not serve the statutory goal. It could very likely be challenged in court.

“This is an idea [RINs on exported ethanol] that I’m puzzled it’s even being taken seriously because you don’t have to be a New York lawyer to understand the legal issues that are at play here,” said Scott Irwin, an ag economist with the University of Illinois.

“It just seems patently obvious to me that any scheme where you try to count RINs as valid attached to exported ethanol just directly contradicts the basic purpose of the RFS. It seems to me [it’s] an ideal that should die a quick death. If it doesn’t, I can’t imagine it wouldn’t die of a quick legal challenge because it’s so obvious.”

The White House meeting took place on Tuesday.

AgDay national reporter Betsy Jibben has more on the meeting. She talks with Scott Irwin, ag economist with the University of Illinois; Sen. Chuck Grassley (IA); Matt Merritt, director of public relations with POET Energy and Pete Meyer, senior director with ag analytics with S&P Global Platts.

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